Are Companies Backsliding on Skills-Based Hiring?

A new report suggests that firms are not practicing what they preach on employing non-degree-holders.

Around half of companies that responded to a Nov. 2023 survey reported that they would remove bachelor’s-degree requirements for certain positions in 2024. Four years of college education may provide candidates with knowledge and soft skills, but many employers say they see factors like experience and personality as equally important—or, in some cases, more important.

Adopting a skills-based hiring approach promises greater employment opportunities for the 62 percent of Americans who don’t have a degree, yet the numbers imply that this change has yet to occur. A recent report by Harvard Business School and the Burning Glass Institute found that, although there was a “fourfold increase” in the number of positions from which degree requirements were eliminated, very few employees have actually benefited from this decision. Last year, less than one in 700 hires received new opportunities as a result of the change.

When it comes to skills-based hiring, it seems, many companies readily talk the talk but hesitate to walk the walk—meaning those lacking a bachelor’s degree remain at a significant disadvantage in the job market.

Despite eliminating degree requirements, many companies still highly value college degrees in potential employees.Following the Great Recession, a phenomenon called “degree inflation” began spreading rapidly across America. In response to the high supply of workers seeking jobs, employers began requiring bachelor’s degrees for positions that formerly hadn’t needed one. Today, employers face the opposite issue: There’s no room for degree inflation in a tight labor market. As hiring coach Stacie Haller explains, “a college degree requirement may eliminate many great candidates.”

It’s unsurprising, then, that the majority of hiring managers who turn to skills-based hiring do so hoping to increase the number of candidates in their applicant pool. The benefits extend beyond the hiring process alone; both parties benefit for years after the initial hiring. For employers, the benefit comes in the form of a 20-percent increase in employee retention—non-degree employees who take on positions which formerly required degrees are more likely to remain with the company than their degree-holding counterparts. These same non-degree hires experience, on average, a 25-percent salary increase—or more than $12,400 in extra income yearly—when they take up these positions.

With such benefits associated with skills-based hiring, one would expect the majority of companies to rush to adopt this hiring process. Yet the Harvard/BGI report suggests otherwise. Of the firms studied, only 37 percent actively embraced skills-based hiring. These firms, ranging from small businesses to Apple, hired an average of 18 percent more non-degree employees into positions. By contrast, 45 percent of surveyed firms made “a change in name only, with no meaningful difference in actual hiring behavior” after removing degree requirements. Another 18 percent of firms were deemed “backsliders”: While they initially eliminated degree requirements and hired several non-degree workers, they eventually “relapsed” and ended up hiring fewer workers without degrees. If there are so many reasons to switch to skills-based hiring for many positions, why have so many companies failed to successfully implement this hiring process?

It appears that many of these companies, despite eliminating degree requirements, still highly value college degrees in potential employees. The vast majority of employers are “confident” that college prepares graduates to “succeed in the workforce.” Perhaps, as Derek Newton of Forbes magazine suggests, it’s not the knowledge or hard skills that students are taught in college which employers value, but rather traits such as initiative, resilience, and persistence, which getting through four years of college requires. Perhaps, as venture capitalist Michael Gibson points out, companies are looking for people who are “willing to finish a long four-year project and take assignments and get them done, show up on time and all that.” Or perhaps companies are simply holding onto the narrative that a college education is a baseline indicator of intelligence.

In any case, despite the benefits of skills-based hiring, many companies are still noticeably favoring degree-holding candidates. The lack of increase in the number of non-degree employees hired at many surveyed companies implies that a bachelor’s degree still provides a significant advantage in the job market. Companies hope to reap the benefits of a skills-based hiring process, yet, when it comes down to actual candidate selection, degree-holders still remain on top for roles without degree requirements.

For decades, conventional wisdom has dictated that attending college is important to advance one’s career. The results of the new report indicate that, for now, conventional wisdom is correct; despite recognizing the benefits of skills-based hiring, employers seem to value college degrees more than they’re willing to admit.

Sophia Damian is a student at Wake Forest University and a 2024 Martin Center intern.